Dozens involved in gambling scheme

A Jacksonville lawyer who was once the president of the local bar association is accused of being the architect of a $300 million racketeering and money laundering scheme.

Kelly Mathis, 49, who represents Allied Veterans of the World, was described as the "mastermind" with ties to "virtually every aspect" of what officials called a massive gambling operation. They said he made $7 million from the scheme that spanned 23 Florida counties and six states.

Mathis' attorney said his client, who is being held on $1 million bail, did not profit from illegal schemes.

"My belief firmly is that Kelly Mathis was acting as an attorney for clients who were asking for advice and counsel," said Mitch Stone, whose office is in Jacksonville. "This will have an absolute chilling effect on the practice of law if lawyers have to concern themselves with being charged with crimes based upon advice to clients of how to legally do something."

Mathis was among 57 people connected to the investigation of the St. Augustine-based Allied Veterans, which runs dozens of gaming centers in Florida.

Jennifer Carroll resigned as lieutenant governor the same day she was questioned about her ties to Allied Veterans. Carroll, a former Clay County lawmaker, lives in Fleming Island.

Other high-profile local names include Nelson Cuba, president of the Jacksonville Fraternal Order of Police, and Jerry Bass, 62, of Jacksonville, who is the national commander of Allied Veterans.

Dominick Pape, special agent in charge of FDLE's Jacksonville office, said more arrests are expected, but no one else in the Jacksonville Sheriff's Office is being looked at as a suspect.

Jacksonville Sheriff John Rutherford said his department first started investigating Cuba and union first vice president Robbie Freitas in 2008 over what investigators thought were shell companies they were operating to make money off gaming centers.

In 2010, Rutherford learned Seminole County authorities, the U.S. Attorney's Office and the state Attorney General's Office were working on a similar investigation. Jacksonville joined that probe.

During that time, Rutherford received $500 donations from both Cuba and Freitas for his 2011 re-election campaign.

On Wednesday, the sheriff said he had no choice but to accept that money.

"I was not going to tip them off that we were onto them by refusing that contribution," Rutherford said of the two FOP officials, both police officers. They were in court in Seminole County on Wednesday in handcuffs and dressed in jail jumpsuits.

Officials said Allied Veterans masqueraded as a charity and thereby defrauded veterans, with less than 2 percent of its profits going to charities.

Attorney General Pam Bondi said the group was "shameful" for using the guise of helping those who had served in the military as a means to fund the scheme.

Authorities said four co-conspirators received more than $90 million from the gaming centers: Mathis, Bass, Johnny Duncan, 62, of South Carolina, and Chase Burns, 37, of Oklahoma.

Burns owns International Internet Technologies, which is accused of providing Allied Veterans with the technical tools necessary to run casinos. The company's software was supposed to skirt the line dividing sweepstakes from gambling.

IIT earned more than $68 million from the gaming centers, authorities said.

The series of arrests that shuttered 58 Florida gaming centers began Monday night when a federal search warrant was executed at Burns' company.

Authorities said 53 others were involved in a scheme to hide $194 million in gambling proceeds.

The investigation that culminated in the arrests began after a raft of complaints, authorities said, including one from a World War II veteran who said he was appalled that veterans were being used to camouflage a casino.

Seminole County Sheriff Donald Eslinger said those involved exploited veterans to "line their own pockets with illicit proceeds," including property, boats and luxury cars, including Lamborghinis and BMWs.

Although Allied Veterans has long argued that its operations are no different than those like the Monopoly sweepstakes used by McDonalds, Eslinger said the company would have been violating the law even if that were true: The company never registered with the state department overseeing such games.

Allied Veterans consistently refused to reveal details of its finances, authorities said. "They never wanted anyone to see behind the veil," said FDLE Commissioner Gerald Bailey.

Law enforcement agents are in the process of seizing bank accounts that total $64 million, Eslinger said.

State and Seminole County officials filed a forfeiture action Tuesday to seize a two-story, waterfront home that Bass and his wife purchased for $420,000 in 2010. Bass bought the home, located at 6718 Oakwood Drive next to Pottsburg Creek, after obtaining a $325,000 loan from Allied Veterans Management Group Inc., a for-profit business that authorities say got revenue from the gaming center.

Bailey said the next phase of the investigation will look at suspicious real estate partnerships and political contributions.

In 2011, Bass sold three homes to the organization - his previous home at Waterview Circle on the Northside for $180,000, a West 19th Street home in northwest Jacksonville for $65,000; and a Cahoon Road home on the Westside for $65,000. The homes currently are owned by Allied Veterans Management Group.

One way Allied Veterans is accused of protecting itself was to pay members of law enforcement and divert proceeds to the Jacksonville Fraternal Order of Police, the affidavit said.

The affidavit lists Cuba and Freitas among the owners, operators, managers or supervisors of Seaside Internet LLC, which operated three gaming centers.

Cuba and Freitas were also tied to two Davis Internet Management Co. affiliates in Yulee. The two also are listed as having an authorized signature on the Enzyme Consultants LLC, which is described as a "shell" or "paper" corporation used to launder proceeds generated by the gaming centers, according to the affidavit.

The pair withdrew money in increments of under $10,000 from the account of the FOP Foundation, the charity arm of the union, to avoid filing currency transaction reports under the law, according to the affidavit.

Cuba also opened and controlled a bank account in the name of the foundation that received illegal proceeds directly from the two Nassau affiliates, the affidavit said. About $465,000 was deposited into the foundation account controlled by Cuba from 2008 to 2012.

Police closed Allied Veterans-run centers Tuesday. When asked how customers who were on computers at the time law enforcement forced them out will get their money back, Bailey said he was not sure how that would work.

The future is also uncertain for a transitional center for homeless veterans that has been funded largely by Allied Veterans.

"I don't know what's going to happen," said Len Loving, CEO of Allied Veterans Center, a separate nonprofit. "If there are not any more contributions coming this way, we're going to have to do an alternate plan, somehow, or there will be 30 people who will be homeless again."

Allied Veterans has provided the bulk of the money to operate the center on Acme Street. It paid $850,000 to buy a former nursing home, then spent about another $242,000 for renovations. It then gave most of the center's $600,000 operation budget for 2012 and signed over the building to Allied Veterans Center, said administrative director, Suzie Loving.

Len Loving said the center might have enough money to operate into June.

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